Author: George Mahfouz

Flat week…

Posted on by George Mahfouz

Despite Thursday’s 250 point Dow drubbing, the key indices closed mixed on the week. The Dow Jones Industrial Average (chart) finished the week down 126.39 points, the Nasdaq (chart) finished up 19.62, the S&P 500 (chart) closed lower by 7.82 points and the Russell 2000 (chart) closed the week out gaining 3.84 points. Equities digested a lot of news this week including the Federal Reserve indicating they are ready to step in should the economy continue to falter. However, certain traders were disappointed the Fed did not provide another round of quantitative easing, hence a significant sell-off ensued on Thursday.

Personally, I think the markets need to quit relying so much on central bank stimulus and begin to focus on corporate earnings, which have been overall quite impressive. We are entering the last trading week of the second quarter which could prompt end of quarter window dressing. Window dressing is a strategy used by certain mutual funds and institutions near the end of the quarter to improve the appearance of their fund(s), this could bode well for the markets. Another potential positive for equities is Q2 earnings reporting season which begins in July. In my opinion, this is a key catalyst in whether or not stocks will stabilize over the summer and hopefully de-emphasize what the central banks may or may not do. Good luck to all.

Have a great weekend 🙂

~George

Central banks boost stocks…

Posted on by George Mahfouz

After China announced a surprise rate cut last week, central bankers from Japan to Britain went on the record this week indicating they are ready to flood the system with liquidity if need be. This was enough to continue to fuel the key indices to one month highs. The Dow Jones Industrial Average (chart) closed the week up 1.70%, the Nasdaq (chart) +0.50%, the S&P 500 (chart) +1.30% and the Russell 2000 (chart) +0.28%.

I thought you were supposed to sell in May and go away? Apparently not this year. The concern I have here is that the markets are rallying on stimulus hopes and not fundamentals. In looking at the most recent economic data released this week, manufacturing activity is falling sharply, consumer sentiment is at its lowest level in months and unemployment is still a big threat.

Looking ahead to next week, obviously the outcome of the Greek elections will be the highlight for the markets on Monday. One thing is for sure, no matter the what the results are, central banks from around the world are ready to do what it takes to stabilize the financial markets and financial system. This stance taken by the global bankers should continue to bode well for not only equities, but in particular gold. Good luck to all.

Have a great weekend 🙂

~George

Best week of the year…

Posted on by George Mahfouz

Stocks posted their best weekly showing of the year erasing almost half of the losses that occurred in May. The Dow Jones Industrial Average (chart) soared 3.59%, the Nasdaq (chart) +4.04%, the S&P 500 (chart) +3.72% and the Russell 2000 (chart) finished the week up 4.30%. This snapback rally was on the heels of China making a surprise interest rate cut on Thursday.

Up until this week, equites had been under immense pressure due to the European debt crisis and more recently our own country’s weakening economic picture. In last week’s blog I eluded to the potential of the global central banks stepping in and placing a floor under the markets with additional liquidity measures, and sure enough China was the first country to act. This was followed up by our own Federal Reserve reiterating to Congress thier commitment to intervene should the economy here continue to falter.

To sum up the latest actions by the global central bankers and it relates to equities, at the very least stability should come into the marketplace with the potential to recharge the bull run we had been on. In addition, I would expect that gold becomes a huge beneficiary from the heightened debt levels that are on the balance sheets of central banks around the world.

That said, at some point and time and probably sooner than later, the economies from around the globe will have to be able to stand on their own two feet. Central bankers can only do so much before the stimulus programs begin to have an overall negative effective on the economy and markets. Good luck to all.

Have a great weekend 🙂

~George

Unemployment report send equities spiraling!

Posted on by George Mahfouz

As if the European crisis wasn’t enough. Yesterday’s unemployment report was a stark reminder that our own economy is by no means out of the woods yet. U.S. employers added only 69,000 jobs to their payrolls, far less than the 150,000 that most economists projected. The unemployment rate also ticked up to 8.2%. This sent the markets into a tailspin with the Dow Jones Industrial Average (chart) losing 274.88 points, the Nasdaq (chart) -79.86, the S&P 500 (chart) -32.29 and the Russell 2000 (chart) -24.40 points. Couple yesterday’s tape with the 6%+ decline for the key indices in May, and you have almost a 10% correction in a month and a day!

Too far too fast? Not so sure? Unless the governments and central banks unite over this weekend and come up with some sort of an additional stimulus plan, we could be in for further downward pressure on Monday and the rest of next week. I am not suggesting that the central banks should step in every time we have a market meltdown, but with the incessant debt crisis in Europe and now our own economy faltering, there may not be another alternative.

As an investor/trader in this type of market environment, one must exercise extreme caution. For me it would be easy to say “well the markets have now officially broken down and broke through key technical support levels, let’s go short” and probably that strategy would work. However, I have seen this movie before in whereas technically and fundamentally speaking equities appear to heading a lot lower. Then you wake up one morning and indeed the governments from around the world come up with a blanket plan to place a floor under the markets and then the massive rally begins.

Point being this, we live in a very different world today and what appears to be undervalued or for that matter overvalued in the marketplace, it really doesn’t matter. So long as you have accommodative Fed policies, the markets will trade according to the central bank(s) guidelines, not on fundamentals. Good luck to all.

Have a great weekend 🙂

~George

A week of respite for stocks…

Posted on by George Mahfouz

Despite the Dow, Nasdaq, S&P 500 and the Russell all finishing lower on Friday, these key indices finally completed a week in positive territory. In fact, this is the first positive week for the bellwether indexes in the month of May. For the week, the Dow Jones Industrial Average (chart) closed up 0.69%, the Nasdaq (chart) +2.11%, the S&P 500 (chart) +1.74% and the Russell 2000 (chart) gained 2.57%.

Without question the markets last Monday experienced a technical bounce due to oversold conditions across the board. What was impressive to me is that equities for the most part managed to hold on to their gains. Not so sure if this will be the case this upcoming week. Between the never ending saga from across the pond and a slew of economic reports from here at home, next week is setting up to be to be a very volatile week. The most critical economic report that all will be watching is Friday’s jobs report. If we do not begin to see the private sector strengthen in a meaningful way, we could be in for a long summer and a possible new administration this fall. Good luck to all.

Have a safe and healthy Memorial Day weekend 🙂

~George

Bears take charge!

Posted on by George Mahfouz

Although the markets appear to be oversold, the bears have clawed their way back into the spotlight. For the week, the Dow Jones Industrial Average (chart) lost 3.52%, the Nasdaq (chart) -5.28%, the S&P 500 (chart) -4.30% and the Russell 2000 (chart) -5.42%. In my May 6th blog, I eluded to the 200-day moving average being tested on these key indexes and it appears that next week this major support line will indeed be intruded. In fact, the Russell 2000 (chart) not only tested its 200-day, it closed below it yesterday.

So what has happened in May to turn the markets and what is the retail investor to do? Without question the European debt crises is at the forefront of this selloff. Between Greece’s seemingly imminent default and multiple Spanish bank downgrades last week, this alone was more than enough to spook investors. Then add in the mix the continuing fallout of JPMorgan’s (NYSE: JPM) massive trading loss, plus the spectacular run that stocks have had since last October, it’s no wonder we find ourselves in the midst of a 10% correction.

So what is one to do? As an investor/trader when I see fear in the marketplace as we have now, I make a list of top notch companies and look for select buying opportunities. However, I have learned that you must be patient in this type of environment and if you think the market is close to bottoming, it is always best to take on positions very slowly and in very small increments. For example, if you are looking to buy 1000 shares of a given company that you have been waiting for to go on sale, you may want to consider 100 share lots over a period of time. Far too many times investors think that equities have hit bottom and buy all at once without considering that stocks and indexes can continue to go lower and remain oversold for an extended period of time. With the scale in method, the good news is that should the markets turn and go higher, at least you have initiated a position and will benefit from the turn. Whatever your strategies are, it’s always best to exercise patience in this type of climate and always use protective stops on all of your postions. Good luck to all.

Have a great weekend 🙂

~George

A tipping point?

Posted on by George Mahfouz

Over the past few weeks, the Euro Zone and in particular Greece has re-ignited fears in the marketplace and now JPMorgan’s (NYSE: JPM) $2 billion dollar trading loss disclosed on Thursday, just might be enough for the bears to take charge of the markets. The Dow Jones Industrial Average (chart) finished the week down 1.67%, the Nasdaq (chart) -0.76%, the S&P 500 (chart) -1.15% and the Russell 2000 (chart) -0.23%.

One confirmation I look for as it pertains to market sentiment is volatility and whether or not it’s on the rise. The most widely followed index that tracks market vol is the (VIX) (chart), also know as the fear gauge . Even though the value of the VIX (chart) is below 20 which historically represents a calm market environment, the VIX has spiked 25% since May 1st. I will be paying closer attention to this index over the coming weeks.

The week ahead promises to be yet another action packed week. A number of economic reports will hit the tape on Tuesday including the closely watched retail sales report and Empire state manufacturing survey. Also this week, earnings will be announced from Home Depot (NYSE: HD), Deere (NYSE: DE) and WalMart (NYSE: WMT)  just to name a few. Closing out the week is one of the most widely anticipated IPO’s in recent memory and that is the listing of Facebook on Friday. Facebook will be trading under the symbol (FB) and is reported to launch with a market cap of almost $100 billion dollars. Good luck to all.

Have a great week 🙂

~George

A weak week for stocks…

Posted on by George Mahfouz

The financial markets suffered sharp declines this week capped by a disappointing Jobs Report. The Dow Jones Industrial Average (chart) fell 1.44%, the Nasdaq (chart) -3.68%, the S&P 500 (chart) -2.44% and the Russell 2000 (chart) -4.07%. Both the S&P 500 and Nasdaq experienced their worst weekly performance this year.

So what now? As I review the technicals of how these key indices are setting up, three of the four are trading below their 20 and 50 day moving averages with the sole exception being the Dow. Certain market technicians look at these key moving averages as support and resistance markers with the most closely watched 200-day as the main barometer. Now one day or for that matter a few days trading below this popular technical indicator doesn’t necessarily make a trend, however, if these indexes remain below their shorter term moving averages for an extended period of time, I will be looking for the 200-day to be tested at some point and time. If that were to occur, we could be looking at a near term healthy correction for equities. Good luck to all.

Have a great week 🙂

~George

All eyes on tomorrow’s Jobs Report…

Posted on by George Mahfouz

April proved to be a tepid month for the markets with the Dow Jones Industrial Average (chart) barely eking out a gain and both the Nasdaq (chart) and S&P 500 (chart) closed the month slightly in the red. However, I believe that May will be far from languid for stocks. A key barometer as to how equities will fair in May is the release of the April Jobs Report, which will be issued before the open tomorrow. Most economists are expecting a gain of 160,000 new jobs and the jobless rate to remain at 8.2%. A report out this morning indicated a sharp drop in weekly jobless claims which should bode well for tomorrow’s report.

Once the markets digest the employment numbers, the question then is, will the old adage “sell in May and go away” apply this year? Historically speaking, May is one of the most favorable months for the bulls to take profits in and for the bears to sell. However, we are in an election year and we have one of the most highly anticipated tech IPO’s later this month with the listing of Facebook, which looks to be priced at a potential valuation of up to $95 billion. One thing I think we can all look forward to is an increase in volatilty in the month of May, which means if you are a trader, an increase in opportunites.

Good luck to all 🙂

~George

Apple and Amazon just might of done it!

Posted on by George Mahfouz

With the way the week started you might of thought that the bears might of got the upper hand on stocks. However, strong earnings continue to bode well for the markets. For the week, the Dow Jones Industrial Average (chart) gained 1.53%, the Nasdaq (chart) +2.29%, the S&P 500 (chart) +1.8% and the Russell 2000 (chart) notched a gain of 2.66%.

I believe that the markets can thank Apple (NasdaqGS: AAPL) which once again blew out earnings in their most recent quarter. Apple earned a staggering $12.30 per share while netting $11.6 billion. This propelled stocks on Wednesday, especially tech stocks. Now if Apple wasn’t enough, Amazon.con (NasdaqGS: AMZN) reported their earnings after the close on Thursday and also blew out estimates by earning $130 million or 28 cents a share compared to the projected 7 cents a share that most analysts expected.

One other factor that certainly didn’t hurt equities was the Federal Reserve’s reiteration of their accommodative monetary policy by indicating that rates will continue to remain low well into 2014. So with a strong earnings reporting season continuing and a friendly Fed, we might just witness new highs in the coming weeks?

Good luck to all 🙂

~George